The course analyzes challenges faced by transition and emerging-market economies, i.e., those middle- and low-income countries, which have conducted market-oriented economic reforms and become integrated into the global economy since 1990s.
It starts from a brief history of communist economic system based on central planning in the former Soviet Union and Central and Eastern Europe, its evolution and collapse at the end of 1980s/ early 1990s and subsequent transition to a market system in 1990s and 2000s. Then it analyzes experience of market reforms in China, India, other Asian countries, Middle East and North Africa, Sub-Saharan Africa and Latin America at the same period. Finally, it discusses the problems of contemporary global economy and global and regional economic governance with the special focus given to emerging-market economies and their role.
By the end of the course you will be able to analyse emerging-market economies and economies in transition, taking into account their crucial characteristics and historical experience.
Participation in the course does not require any preconditions, however, basic economic knowledge would be an advantage.
In order to pass successfully this course you must score not less than 80% for each of six after module quizzes and complete the peer-assessed essay at the end of the course.
Do you have technical problems? Write to us: coursera@hse.ru

Dear Students, In this module we will discuss the origins of a centrally planned economy, its major characteristics, evolution, attempts of its reform and history of its collapse, agenda of market transition in 1990s and its major components such as macroeconomic stabilization, domestic and external liberalization, and privatization.There will be 7 parts of video-lectures of 7-25 minutes length. You can use recommended literature to go deeper in learning this module. After you watch the video-lectures you are to complete the first quiz. We look forward to seeing you in class! Best wishes,Your course team.

Enseigné par

Marek Dabrowski

Professor

Transcription

[MUSIC] The topic of this lecture will concern origins of a centrally planned economy, and its major characteristics. What were theoretical and ideological foundations of a centrally planned economy? Those were famous thinkers and social, political activists, Karl Marx and Vladimir Lenin, whose vision was the society without exploitation, which were associated by them with market forces and private ownership of means of production. And because of its ideological/political context of this idea many scholars call frequently this type of economy is communist/socialist or command economy. So what were the basic characteristics of such an economy, according to common socialist doctrine? First, it was rejecting private ownership of means of production, because in their view it led to exploitation and social inequality. So the recipe was state or collective ownership with minor exception, which we then come back to when we discuss reforms of this central planned economy model. Second very important was rejecting market coordination and replacing autonomous decision of economic options by central planning. In Vladimir Lenin works it was put as national economy working as the same factory, and being vertically managed. And this was a concept which was really implemented and practiced and some other proposals of this doctrine were never implemented because they clearly would've been corrupted. One of them was that individual conception, this would be according to Meetz and others, that we should eliminate money from the economy and economy should be non-monetary. Actually it was a very brief period during the War Communism in Soviet Russia where such an attempt was made but failed. These were ideas, but concrete historical context of the implementation became a bit different that authorities, especially Karl Marx, forecasted. Because, according to Karl Marx, proletarian revolution should come in the most developed industrial countries, but actually it happened in Russia, which was only in the first stage of industrialization. So, this model was implemented in the condition of post-revolutionary Russia, during civil war and international isolation. Very soon it would became clear that the dream of the worldwide revolution and building the global socialist or centrally planned economy is non-realistic and it would be necessary to build socialist and to think isolated country. This was also specific problem of Russia, of it's unfinished industrialization. As we know, in the socialist doctrine working class play a leading role. So in a country where it was dominant agriculture economy and peasants population, it was a big problem. So, from the very beginning concrete Russia model of centrally planned economy focused on accelerated force industrialization. And of course there were also military needs coming from first civil war and then international isolation and international rivalry competition. We can distinguish similar stages of implementation of this idea. The first attempt called as war communism came in 1918- 1921, and largely failed. The result was famine, massive resistance of peasants and other population. So it led Lenin to revert reversing this policy and introducing the New Economic Policy, NEP, which actually was restoring substantial segments of the market economy, especially in agriculture, small industry and trade. But there's the second attempt follow. It was Stalinist industrialization and collectivization of agriculture which started in the late of 1920s. It was completed at very high economic social and human costs, which I will tell a bit later. And after the Second World War, with the collapse of Nazi Germany and Soviet victory, a political and economic model of socialism was exported to central Eastern Europe. And shortly after was Chinese Korean and Vietnamese revolution also to those countries. How centrally planned economy looked in it's Stalinist, let's say, classical version? There was dominant role of the central plan, production targets to enterprises, allocation of inputs, and administrative, while including labor, investment decisions were also taken centrally. And the role of prices, financial flows, and budget constraints were clearly secondary. Money should follow central plan and production targets. And prices and wages were determined in an administrative way. And there was state monopoly of foreign trade, lack of currency convertibility, multiple exchange rate so enterprises where isolated from world markets and actual economy was in full autarky. An important characteristic of this model was forced industrialization, massive movement of resources from agriculture to industry, which is a project given to heavy and military industry at cost of other sectors. But this is not the end of studying this model. We must also tell about political and human dimension of this model, because this model could work only because it was accompanied by political totalitarianism what means hegemony of communist party, restriction on political and civic freedoms, political terror, the excessive power of the army, security agencies and police. And a period of Stalin's industrialization was based on massive use of forced labor. So, it's so called it labor camp, Gulag system. And it led to tragic consequence. It was famine caused by collapse of private agriculture and period of collectivization in end of 1920s, started in 1930s, which brought several millions of victims. And on the other hand, many claims the Soviet economy progress is through that became industrialized but the question of how rapid it was economic growth remains debated until today by economic historian. What were effects, economic effects of this model? Most importantly, it created perverse microeconomic incentives connected within the hands of planning bargain. Enterprises try to diminish the production target which they received from the center, and the same time they demanded higher input allocation. And they work under some budget constraints as put by very well known Hungarian economist Janos Kornai. So they never took care about profit, about cost of the production input, it was important to meet its plan targets and to receive from the center enough inputs to fulfill this plan. Of course administrative price hence led to price distortion and market shortages, rationing of consumer goods, and production input. And this was again, quoting Janos, colonize a so-called shortage economy, where produce and never was consent about sending its product because these products were always in deficit. But his biggest problem was obtaining inputs to products. And what already I mentioned before, economic was autarky. It was simple substitution, industrialization follow, lack of the international competitiveness of this new industry, and huge structural distortion in terms of shadow various sectors but also in terms of size of enterprises. And political criteria dominated in nomination of managerial positions, so quality of management also remained pretty poor. In the next part we'll speak about attempts to reform the centrally planned economy and to at least diminish its short comings. And then we'll tell about failure of this attempts and how the system collapsed in end of 1980s. [MUSIC]